China lends Costa Rica $400 million on Xi visit

SAN JOSE Mon Jun 3, 2013 6:41pm EDT

China's President Xi Jinping and his wife Liyuan receive the Keys to the City from San Jose Mayor Johnny Araya in San Jose June 3, 2013. REUTERS/Carlos Flores

China's President Xi Jinping and his wife Liyuan receive the Keys to the City from San Jose Mayor Johnny Araya in San Jose June 3, 2013.

Credit: Reuters/Carlos Flores

SAN JOSE (Reuters) - China lent Central American ally Costa Rica nearly $400 million on Monday during a visit by Chinese President Xi Jinping to a region where Beijing has traditionally vied with rival Taiwan for influence.

Costa Rica recently backed China in its dispute with Taiwan, which Beijing regards as a renegade province, in votes at the United Nations. Members of the Costa Rican opposition said the deals announced on Monday raised questions about what China expected in return.

The bulk of the financial aid was made through the Export-Import Bank of China, which said it was giving a $296 million loan to fund the extension of a road to connect the central part of Costa Rica to its main shipping port in the Caribbean.

A second loan for $101 million was made to allow Costa Rica to replace some 16,000 public transportation vehicles. Both loans must be approved by Costa Rica's Congress.

The Caribbean and Central America are regions where China and Taiwan have competed for allies. China and Taiwan have been ruled separately since defeated Nationalist forces fled to the island at the end of a civil war in 1949.

China still claims the island as its own territory and reserves the right to use military force to reclaim Taiwan, although economic ties have broadened rapidly and a free-trade agreement links the two sides.

Costa Rican Foreign Minister Enrique Castillo said on Sunday that it would "only be natural for China to ask us for support at the United Nations level."

But after the loans were announced by the Costa Rican government, Castillo said no strings had been attached.

"In the political arena, China has asked us for nothing, there have been no conditions imposed on us," he said.

"It's been our initiative, since we are friends, to offer our position in the region and help them start new friendships with other countries here," he added.

FREE LUNCH?

Xi's visit came on the sixth anniversary of the beginning of diplomatic relations between the two countries. He is set to fly to Mexico on Tuesday for a state visit, and then to the United States to meet President Barack Obama later in the week.

Nine deals were signed on the visit, including a Chinese donation of $16.3 million for Costa Rica's police academy. Costa Rica will be applying for a loan from China to buy 5,000 solar panels in coming months, the government said.

But a $1.5 billion upgrade of an oil refinery by China National Petroleum Corporation, due to be funded partly through a $900 million loan from the China Development Bank, is still pending as Costa Rica is not yet satisfied with the terms.

The main opposition Citizens' Action Party, or PAC, submitted a letter in Mandarin to Xi calling for transparency on the agreements made on Monday, PAC congresswoman Carmen Munoz said.

"We know there's no such thing as a free lunch and from this point of view we are questioning why Costa Rica is opening its doors for China and in exchange for what," she said. "We'll see how these gifts and donations express themselves in the future."

China is Costa Rica's second-biggest trading partner after the United States. Costa Rica imported $1.44 billion in Chinese goods last year, while its exports to China were $331 million, government data showed.

(Editing by Simon Gardner and Peter Cooney)

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